Peter Cordaro, who owns 100 units of Tocor II, filed a classaction suit last week to halt Centocor Inc.'s tender offer toacquire the outstanding units of Tocor II.
The suit, filed in the Court of Common Pleas in Chester County,Pa., against Centocor, Tocor II and four companyrepresentatives, charges that Centocor's offering price of $40per Tocor II unit is "grossly inadequate." It also accuses thedefendants of failing to conduct an independent analysis of theoffer, apprise themselves fully of the maximum value of TocorII, maximize shareholder values and disclose all material facts.
Centocor (NASDAQ:CNTO) of Malvern, Pa., set up Tocor II in1991 to conduct research and development of small peptidemolecules. At that time Centocor filed for a 1.5 million-unitoffering of Tocor II at a proposed price of $40 per unit. Eachunit of Tocor II consists of one share of Tocor II common stock,one callable warrant to purchase a share of Centocor commonstock (exercisable at $49.75 per share) and one series Twarrant to purchase a share of Centocor common stock(exercisable at $64.50 per share). These securities will trade asa unit until Friday. Centocor had the option to purchase all theTocor II shares at $58 each in 1993, $76 in 1994 and $106 in1995.
On Dec. 10, Centocor announced that it was offering to purchasethe 2.25 million outstanding units of Tocor II for $40 per unit,payable in shares of Centocor common stock, based on theaverage closing price of the stock for 30 trading days precedingthe fifth trading day prior to the offer's expiration, andprovided that the number of shares issued per unit would notbe less than 2.73 or more than 3.20 (see BioWorld, Dec. 13).The price of the units jumped $13.25 on Dec. 10, closing at$36.25.
Tocor II separately announced that its board of directorsunanimously recommended that holders accept the offer andtender their units.
Cordaro's suit says that "in recommending that the offer beaccepted, the Tocor II board purportedly relied upon therecommendation of a 'special committee of the board.' "The suitalleges that this committee consisted of defendants MarcFeldman, a director of Tocor II and consultant to Centocor;David Golden, a Tocor director and managing director ofHambrecht & Quist; and Stelios Papadopoulos, a Tocor directorand the managing director and head of the Health SciencesInvestment Banking Group for PaineWebber Inc. HubertSchoemaker, chairman of Tocor II and chairman and presidentof Centocor, is also named as a defendant.
The suit asks the court to enjoin "preliminarily andpermanently," Centocor's offer "under the terms presentlyproposed" and to require the defendants to make fairdisclosure of all material facts, to establish a "trulyindependent" special committee, to engage a truly independentand objective financial adviser to determine whether the termsof the offer are fair,. and if the offer is consummated, to eitherrescind the transaction or award damages to the plaintiff.
Centocor said Monday that regardless of the suit, its exchangeoffer cannot be commenced until it registers the shares of itsstock that it will offer to Tocor II unit holders with theSecurities and Exchange Commission.
-- Brenda Sandburg News Editor
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